Stock Quotes in this Article: ANAD, BIOF, CLSN, DNDN, OPTR

WINDERMERE, Fla. (Stockpickr) -- Trading stocks that trigger major breakouts can lead to massive profits. Once a stock trends to a new high, or takes out a prior overhead resistance point, then it's free to find new buyers and momentum players that can ultimately push the stock significantly higher.

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An example of a recent successful breakout trade is specialty pharmaceutical player Apricus Biosciences (APRI) which I featured in Feb. 01's "5 Stocks Poised for Breakouts." I mentioned in that piece that shares of APRI were uptrending strong for the last month, with the stock consistently making higher lows and higher highs, which is bullish technical price action. This stock was also starting to push back above its key technical level at its 200-day moving average of $2.77 a share. That move was quickly pushing APRI within range of triggering a near-term breakout trade once it cleared $2.97 to $3.18 a share with high volume.

Guess what happened? Shares of APRI triggered that breakout the following trading session with heavy upside volume. Since triggering that move, shares of APRI have ripped higher towards its current price of $3.40 a share. That's a big gain for anyone who bought the stock ahead of the move at around $2.70 to $2.75 a share. Shares of APRI still have a chance to trend much higher if it triggers another key breakout trade that I highlighted in the original article.

Breakout candidates are something that I tweet about on a daily basis. I frequently tweet out high-probability setups, breakout plays and stocks that are acting technically bullish. These are the stocks that often go on to make monster moves to the upside. What's great about breakout trading is that you focus on trend, price and volume. You don't have to concern yourself with anything else. The charts do all the talking.

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Trading breakouts is not a new game on Wall Street. This strategy has been mastered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas. These pros know that once a stock starts to break out above past resistance levels, and hold above those breakout prices, then it can easily trend significantly higher.

With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels.

Optimer Pharmaceuticals

One name that's trending very close to triggering a near-term breakout trade is Optimer Pharmaceuticals (OPTR), which is a biopharmaceutical company focused on discovering, developing and commercializing anti-infective products. This stock is off to a hot start in 2013, with shares up 16.6%.

If you take a look at the chart for Optimer Pharmaceuticals, you'll notice that this stock has recently moved back above its 50-day moving average of $9.85 a share and it's been uptrending for the last few weeks. During that uptrend, shares of OPTR have been consistently making higher lows and higher highs, which is bullish technical price action. That move is quickly pushing shares of OPTR within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in OPTR if it manages to break out above some near-term overhead resistance levels at $10.79 to $10.93 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 520,582 shares. If that breakout triggers soon, then OPTR will set up to re-test or possibly take out its next major overhead resistance levels at $11.74 a share to its 200-day moving average at $12.80 a share.

Traders can look to buy OPTR off any weakness to anticipate that breakout and simply use a stop that sits right around its 50-day moving average of $9.85 a share. One could also buy off strength once OPTR takes out those breakout levels with volume and then simply use a stop that sits near $10.40 to $10.30 a share.

BioFuel Energy

Another stock that's trending within range of triggering a major breakout trade is BioFuel Energy (BIOF), which is engaged in the production and sale of ethanol and its co-products through its two ethanol production facilities located in Wood River, Nebraska and Fairmont, Minnesota. This stock has been rocking to the upside during the last six months, with shares up 38%.

If you take a look at the chart for BioFuel Energy, you'll see that this stock has been downtrending badly for the last four months, with shares dropping from its high at $7.80 a share to its recent low of $3.38 a share. During that move, shares of BIOF have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of BIOF have now started to bounce off some support levels at $4 to $4.30 a share and it's quickly moving within range of triggering a breakout trade above some key overhead resistance levels and above a key downtrend line.

Market players should now look for long-biased trades in BIOF if it manages to break out above some near-term overhead resistance levels at $5.21 to $5.44 a share and then once it clears more resistance at $5.66 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 150,892 shares. If that breakout triggers soon, then BIOF will set up to re-test or possibly take out its next major overhead resistance levels at $6.55 to $7 a share.

Traders can look to buy BIOF off any weakness to anticipate that breakout and simply use a stop that sits just below some key near-term support at $4 a share. One could also buy off strength once BIOF clears those breakout levels with volume and then simply use a stop that sits just below its 200-day moving average of $5.07 a share.

Dendreon

One name that's quickly moving within range of triggering a near-term breakout trade is Dendreon (DNDN), which is a biotechnology company focused on the discovery, development and commercialization of novel therapeutics that improve cancer treatment options for patients. This stock is blazing a trail to the upside so far in 2013, with shares up 28%.

If you look at the chart for Dendreon, you'll notice that this stock has been uptrending very strong for the last three months, with shares soaring from its low of $3.69 to its recent high of $6.89 a share. During that uptrend, shares of DNDN have been consistently making higher lows and higher highs, which is bullish technical price action. Shares of DNDN have recently pulled back and started to bounce off its 200-day moving average of $5.89 a share. That move is now starting to push DNDN within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in DNDN once it manages to break out above some key overhead resistance at $6.89 to $7.20 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 5,723,710 shares. If that breakout triggers soon, then DNDN will set up to re-test or possibly take its next major overhead resistance level at $7.94 a share. Any high-volume move above $7.94 will then put $9 to $10 into range for shares of DNDN.

Traders can look to buy DNDN off any weakness to anticipate that breakout and simply use a stop that sits right around its 200-day at $5.89 a share. One can also buy DNDN off strength once it clears those breakout levels with volume and then use a stop that sits near $6.25 a share.

Celsion

Another stock that's moving within range of triggering a near-term breakout trade is Celsion (CLSN), which is an innovative oncology drug development company focused on the development of treatments for those suffering with difficult to treat forms of cancer. This stock has been destroyed by the sellers so far in 2013, with shares off by 84%.

If you look at the chart for Celsion, you'll notice that this stock recently gapped down huge from around $8.50 a share to just under $1.50 a share with monster downside volume. Following that gap down, shares of CLSN went on to hit a new low of $1.13 a share. That move has now pushed shares of CLSN into extremely oversold territory, since its current relative strength index (RSI) reading is 22.07. Oversold can always get more oversold, but shares of CLSN are now starting to rebound and approach a near-term breakout trade. If this trade triggers, then CLSN could explode higher since the stock is dramatically oversold.

Traders should now look for long-biased trades in CLSN once it manages to break out above some near-term overhead resistance levels at $1.32 to $1.50 a share and then once it takes out its gap down day high at $1.72 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average volume of 3,349,340 shares. If that breakout triggers soon, then CLSN will set up to re-fill some of that massive gap down zone from a few weeks ago. Some possible upside targets are $2 to $2.75 a share.

Traders can look to buy CLSN off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $1.13. One can also buy off strength once CLSN takes out those breakout levels with volume and then simply use a stop that sits just below $1.25 a share. I would add aggressively to either position once CLSN takes out that gap down day high at $1.72 a share with high volume.

Anadigics

My final idea that's trending very close to triggering a major breakout trade is Anadigics (ANAD), which is a provider of semiconductor solutions in the growing broadband wireless and wireline communications markets. This stock has been soaring during the last six months, with shares up 126%.

If you look at the chart for Anadigics, you'll notice that this stock has been trading inside of a consolidation pattern for the last month and change, with shares moving between $2.23 on the downside and $2.71 on the upside. Shares of ANAD have now started to find buying interest above $2.46 to $2.50 a share and its quickly moving within range of triggering a major breakout trade above the upper-end of its recent sideways chart pattern.

Traders should now look for long-biased trades in ANAD once it manages to break out some near-term overhead resistance levels at $2.70 to $2.71 a share and the above some past resistance at $2.77 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 604,531 shares. If that breakout triggers soon, then ANAD will set up to re-test or possibly take out its next major overhead resistance levels at $3.22 to $3.44 a share. Any high-volume move above $3.44 will then put $4 into range for shares of ANAD.

One could look to buy ANAD off any weakness to anticipate that breakout and then simply use a stop that sits right below its 50-day moving average of $2.30 a share. Traders can also look to buy ANAD off strength once it takes out those breakout levels with volume and then simply use a stop that sits just below some key near-term support levels at $2.50 to $2.46 a share.

To see more breakout candidates, check out the Breakout Stocks of the Week portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.

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At the time of publication, author had no positions in stocks mentioned.

 

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.